Video footage provided by the US military appears to conflict with some of the allegations made in the book Hit & Run, the Attorney General says.
David Parker launched a Government inquiry this afternoon into allegations in the book that elite New Zealand soldiers killed civilians in Afghanistan.
In launching the inquiry, Parker noted that he had seen video footage which did not corroborate key aspects of Hit & Run - by Nicky Hager and John Stephenson - which prompted the investigation.
"The footage suggests that there was a group of armed individuals in the village," Parker said.
That contradicted the "non-threatening" portrayal of the village by Hager and Stephenson, he said. The US military footage was around half an hour long and had not been seen by Hager or Stephenson.
However, there were still unanswered questions around the raid, and it remained a controversial issue a year after the book was released, Parker said.
"In light of that, and bearing in mind the need for the public to have confidence in the NZDF, I have decided in the public interest that an inquiry is warranted."
The inquiry will be led by former Supreme Court judge Sir Terrence Arnold and former Labour Prime Minister Sir Geoffrey Palmer.
The inquiry will not have power to lay charges, but could recommend further action.
The book's author Nicky Hager said the inquiry was "very good news".
He said comments by Parker about armed people being seen in video was an example of NZDF using selective evidence to push its case.
"I fully expect the story that has been constructed (by NZDF) to crumble when analysed properly."
Lawyer Deborah Manning, who is representing the Afghan villagers, said it was "unfortunate" Parker saw fit to refer to armed people being seen in video of the raid.
Her clients had stated there were no such insurgents. She also said the presence of weapons in the village was not unusual in Afghanistan, a country in which ownership of weaponry was not unusual.
However, she said she welcomed he inquiry and believed it was covering the issues those villagers felt were relevant.
National's defence spokesman Mark Mitchell, a former Defence Minister, said he was disappointed the Government had decided to hold the inquiry saying it was unnecessary and undermined the Defence Force.
He said he, former Defence Minister Gerry Brownlee and Prime Ministers John Key and Bill English had all made extensive inquiries into the matter, including watching about an hour of video footage of the raid.
"We all came to the same conclusion, that we were satisfied that our NZ Defence Forces had acted legally and they had also acted highly professional in the work they had done over in Afghanistan."
He said if he was not satisfied with the information given to him by the Defence Force he would have done an inquiry himself "but that was not the case".
Mitchell backed up Parker's statements the video footage showed armed people but would not say what else it included because it was classified.
Mitchell said if there had been information prisoners handed over to Afghan security forces were tortured he would have taken action but nothing was flagged as far as he could recall.
Hit & Run, released a year ago, alleged that the New Zealand Special Air Service (SAS) killed six Afghan civilians and injured 15 in a raid on two Afghan villages in 2010.
The inquiry will also look into the alleged mistreatment of Qari Miriam, an Afghan, when he was transferred by NZ troops to Afghan authorities.
It is expected to take a year to conclude, and will consider evidence from Afghan nationals and officials.
Parker said departing Defence Force chief Tim Keating was not aware an inquiry would go ahead when he recently announced his resignation.
Keating said this afternoon that the Defence Force stood by the accounts of Operation Burnham it had previously given.
He said the book contained errors.
He said the Defence Force would co-operate with the inquiry and believed it would confirm the facts of that operation.
Keating said Operation Burnham was well planned out and mandated by the New Zealand Government.
"It was lawfully carried out, with clear rules of engagement," Keating said.
"At all times throughout this operation our NZSAS acted professionally and conducted themselves to the high standards expected of our special forces."
He welcomed "the calibre" of those appointed to lead it – Palmer and Arnold.
The book, released a year ago, alleged that the deaths were covered up the New Zealand Defence Force.
Prime Minister Jacinda Ardern asked Parker to look into the Hit & Run claims in February. Her party had demanded an independent inquiry while in Opposition after the National-led Government refused to do so.
The Defence Force rejected the allegations made in the book, though it later conceded that the authors were correct about the location of the raid after initially saying the NZDF had "never operated' in the villages.
Speaking to reporters at Parliament earlier today, National leader Simon Bridges said a new inquiry would be a waste of money.
"Ultimately spending millions and millions of dollars on what would be [Labour's] 73rd or 74th inquiry is unnecessary.
"The reality is Bill English as Prime Minister and Gerry Brownlee as Defence Minister, then Mark Mitchell as Defence Minister, took the allegations very seriously, went through all of that."
He rejected the suggestion that those ministers were not completely independent, saying that they did not hold the portfolios at the time of the 2010 raid.